With all due respect, market is not always right. If everything was always rightly priced, no one could have made money on market. The GEV chart you posted here is only 1 year. CNG optimum development story is over 33 years old and now very close to production. Chart on development stage does not indicate anything what to expect in production and specially when company will be making profits.
Here is some questions you may have, copied from company ann on 13 March 2020. Please read carefully before posting your next "half-liner" poetic down ramping post. Those do looks like "poem without rhythm".
With respect to the direct impacts on the execution of our business plan and the dramatic fall in the oil price, the Company makes the following comments.
1. CNG is very competitive in an environment of a lower oil price (and gas prices).
On a volume basis, and within a distance of 1,500km, where a pipeline isn’t a feasible option CNG is the lowest cost gas transport solution for the commercialisation of gas production.
CNG significantly reduces the capital requirements of a LNG/FLNG solution required for liquefaction and regasification. The operating cost to compress/transport/decompress is cheaper on a volume basis within our target markets and projects. CNG can also compete with pipelines over shorter distances given the long-lead time for permitting and construction. CNG can also complement the future development of pipelines where markets are growing over the long-term and the scaling up of volumes can be matched with additional CNG ships, which in effect is a flexible floating pipeline.
It is our view, and experience, that while energy prices remain low, it increases the financial risk of new liquefaction projects as they will need to pre-sell enough capacity in order to make their projects economic. This will only delay the onset of additional LNG capacity into an already oversupplied market.
2. GEV is not speculating on the gas markets by developing CNG projects without binding long-term contracts.
The Company has been very clear from 2017, on its strategy for project development and the creation of shareholder value. Financial commitments will only be made on the basis there is line of sight from gas supply to gas sales which leads to a binding long-term sales agreement with a counter-party that is of sufficient credit-rating to support project debt and equity requirements.
For example, GEV is focussed in Brazil where specific projects are under development by multiple AAA-rated oil and gas companies. We are of the view, the projects with associated gas are either not viable for pipelines or the operators have ruled out liquefaction solutions.
GEV is on schedule to complete its first CNG Commercialisation plan at the end of March 2020 for an in-development field with up to 300MMscf/d to be evacuated at less than 1 days sail to the domestic market that remains a net importer of gas at higher prices than a CNG solution can deliver.
We continue to be in dialogue with other major oil companies in the region who are both operators and developers of offshore projects with commercial quantities of associated gas that would otherwise be reinjected. GEV’s floating gas pipeline solution provides a business case for the addition of gas sales revenue and a reduction in reinjection costs and options to manage the reservoir. GEV is targeting at least one more commercial study to be completed in 2020.
With respect to other regions, the Company continues to finalise its due diligence on the potential for a US export location located in the Gulf of Mexico. Given its location and connection to existing pipeline infrastructure to low-cost Henry Hub linked gas, a US export project using the CNG Optimum gas transport solution would provide GEV with the lowest on-water costs, and save significant capital and permitting requirements given the existing infrastructure in place. Our target is to be 40-50% below the on-water costs for a typical US LNG project. GEV has selected its preferred locations and is now working with multiple parties to secure the relevant agreements.
3. Risk to delays by major oil companies making project decisions that include a CNG solution.
GEV acknowledges it cannot control the timing of decisions by a global oil company in any market scenario. That is the reason why we have been actively developing a portfolio of multiple projects across multiple regions to mitigate the risk of a single binary outcome. GEV is actively managing this risk. At this stage we have had no communication from any of the counterparties of delays to their current work program.
4. Does the change in global markets conditions make financing difficult?
GEV acknowledges the potential for challenges to finance an CNG solution of 3-5 ships if economic conditions deteriorate over the course of 2020. However, we make the following points:
• CNG projects involve 75-80% of the capital being deployed to the construction of our ships. Ship financing typically receives a lower cost of capital given the history of ship construction being on time and budget and built in a controlled yard, vs the history of liquefaction projects being plagued with cost-overruns.
• GEV will only be seeking a financing decision on the basis we have credit-backed contract on 10-20yr fixed price terms. Such contracts should attract financing groups seeking to match timelines against long-term infrastructure return targets.
• GEV has appointed Clarksons Platou (Clarksons) to commence work with the company on the financing options required for our first project in Brazil. Their global expertise in shipping and niche infrastructure style projects will also be matched by a global network of investors. Clarksons also act as our Shipbroker, so their confidence in our ship design from a construction risk perspective is without peer to assist with financiers committing.
• GEV intends to appoint a highly credible and experienced shipping manager to operate our proposed fleet of ships. This will be a requirement of debt and equity providers and avoids GEV hiring a large team for future operations.
• GEV is not going to market today with our first CNG project for financing. This will happen progressively as each CNG project matures and the Company can confidently nominate a FID date (Financial Investment Decision). Together with the advice of Clarksons, GEV is taking a proactive approach by selecting those parties with whom we are confident will be a strong global partner as we embark on the construction of the CNG ships and commission multiple projects into operations.
5. What is the near-term news flow from the Company?
The Company remains on track to complete our first CNG Commercialisation Study in Brazil at the end of March and then enter a review period during the June quarter. Discussions are ongoing with additional global oil companies operating in the region and we are targeting a second study.
In the US, management has been active in completing their due diligence on numerous offshore locations connected to existing network of pipelines serving multiple gas producers in the Gulf of Mexico. GEV has now selected the preferred locations and is working with parties on a suite of agreements. We are targeting an update to shareholders at the end of the March quarter on the outcomes of this work and articulate our strategy for a US export project.
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